Paytm will try to emulate Alibaba’s financial services model to disburse small loans to about 500 million Indians by 2020 and is borrowing Rs 150 crore from financial institutions.NEW DELHI: Paytm will try to emulate Alibaba’s financial services model to disburse small loans to about 500 million Indians by 2020 and is borrowing Rs 150 crore from financial institutions for the initiative aimed at widening its presence beyond online retailing.

The Indian ecommerce company will start offering loans to sellers and consumers on its marketplace, including through their debit cards, following the pattern of services such as microlending and banking provided by Ant Financial Services Group, an affiliate of Chinese ecommerce giant Alibaba Group Holding.

"It is amazing that in China they disburse billions of dollars of loans," said Paytm founder Vijay Shekhar Sharma. "We have learned that model can work here. That is why we are excited about it and will continue with it."

Both Alibaba and Ant Financial have invested in the parent of Paytm. Ant Financial also operates Alipay, an Internet-payment service that was launched in 2004 and has more than 300 million registered users generating more than 80 million transactions a day.

Paytm, which started out by offering mobile recharges, utility payments and digital wallets, has expanded into ecommerce and is now venturing into financial services to take advantage of data it has of consumers and sellers on its platform.

Earlier this year, it received a payment banking licence, enabling it to open bank accounts and accept deposits of up to Rs 1 lakh per consumer, issue debit cards and provide net banking services.

"The marketplace model generates merchant and consumer transaction history, which gives worth to our financial services, business and bank.

We are seeing this as a starting point towards our journey in financial services and other layers of business models that will generate more money," Sharma said in an interview. While payment banks cannot lend, One97 Communications, the parent of Paytm, will offer loans to consumers who can opt to convert their purchases into monthly instalments.

Paytm is building up the number of merchants on its marketplace, which the company says will be about 110,000 vendors by the end of the year and will scale up to 1 million sellers over the years. Every merchant on the Paytm platform is a potential customer or seller of its financial services products.

Cashing on data

"Earlier, it was assumed that you are a winner or loser by doing the business of ecommerce and the fight over the marketplace. We actually said the game is bigger and this is just a starting point," Sharma said. "I just need consumer data and this data allows us to build superior financial services, micro loans, advances for merchants, cash advances, insurances and even wealth management."

The company said it is already mapping the credit history of consumers using Paytm mobile wallets and paying utility bills. Creditworthy customers will get instant loans on their debit cards. As a first step, Paytm has tied up with ICICI Bank to offer virtual prepaid cards to its wallet users that can be used to pay for both online and offline purchases.

In September, Alibaba Group and Ant Financial invested $680 million to become the largest shareholders in One97 Communications, valuing the online payment and ecommerce company at about $3.4 billion.